Groups sue U.S. over delayed fines for gas-guzzling vehicles

WASHINGTON (Reuters) - Three U.S. environmental groups filed a lawsuit against the federal government on Thursday for delaying the rollout of higher “gas-guzzler” penalties for automakers producing new vehicles that fail to meet minimum fuel-economy standards.

File Photo: A car is inspected for emissions at a Tennessee Vehicle Inspection Center in Chattanooga, Tennessee November 4, 2015. REUTERS/Tami Chappell

The Center for Biological Diversity, the Natural Resources Defense Council and the Sierra Club filed suit in the U.S. Court of Appeals for the Second Circuit, challenging the National Highway Traffic Safety Administration’s (NHTSA) decision in July to suspend a 2016 Obama administration regulation that more than doubled penalties.

Automakers had protested the hike, saying it could increase industry compliance costs by $1 billion annually.

Congress in 2015 ordered federal agencies to adjust civil penalties to account for inflation and, in response, NHTSA proposed to raise fines to $14 from $5.50 for every 0.1 mile per gallon of fuel that new cars and trucks consume in excess of required standards under the Corporate Average Fuel Economy (CAFE) program.

Last year, two major auto trade associations urged NHTSA to reconsider the proposed hike in fines, as low U.S. gasoline prices contributed to an industry shift away from small and mid-size cars toward the production of more fuel-thirsty pickup trucks and sport utility vehicles for American consumers.

NHTSA has said the increases would potentially result in an additional $30 million in civil penalties being collected annually. But the auto groups said the increases would dramatically raise costs, since they would also increase the value of fuel economy credits.

Some automakers historically have opted to pay fines instead of meeting fuel efficiency requirements - including some small volume luxury automakers. Jaguar Land Rover, owned by India’s Tata Motors, and Daimler AG paid the most in fines in recent years.

A Transportation Department spokeswoman declined to comment on Thursday.

Automakers have collectively paid more than $890 million in fuel efficiency fines since 1975.

NHTSA said in July that many manufacturers were falling behind the fuel standards for model year 2016 and 2017 vehicles and already faced “the possibility of paying larger CAFE penalties over the next several years.”

“Car companies churning out gas-guzzlers shouldn’t get to pay their way out of following rules that cut fuel consumption and protect our climate,” said Vera Pardee, senior counsel at the Center for Biological Diversity.

NHTSA’s proposed higher penalties had been expected to take effect starting in the 2019 model year.

The suit comes as U.S. regulators are considering whether to lower fuel economy requirements for the 2021-2025 model years.

Reporting by David Shepardson; Editing by Bernadette Baum and Tom Brown